FINTRAC ineffectiveness,cuts to RCMP’s IPOC units blamed for unchecked growth of money laundering
A recent report by commission established to Inquire into Money Laundering in British Columbia in 2019 has finally presented its close to 1800 pages long report under Commissioner Austen Cullen.
The report states that BC has taken laudable steps to understand and respond to money laundering threats in British Columbia, but much remains to be done. “Despite a relatively long history of mounting evidence about the extent of this problem – and despite growing public concern – government, law enforcement, and regulatory agencies have, for many years, failed to grasp the nature and extent of this growing problem. They have failed to afford it the priority and resources that are required.”
The report mentions that money laundering is a significant problem deserving of serious attention from government, law enforcement, and regulators. An enormous volume of illicit funds is laundered through the British Columbia economy every year, and that activity has a significant impact on the citizens of this province.
This Commission was established in the wake of significant public concern about money laundering in British Columbia. The public was rightfully disturbed by the prospect of criminals laundering their cash and parking their illicit proceeds in this province.
While it is not possible to put a precise figure on the volume of illicit funds laundered through the BC economy each year, the available evidence shows that the figure is very large (with estimates in the billions of dollars per year in this province alone).
According to the report, “Sophisticated professional money launderers operating in British Columbia are laundering staggering amounts of illicit funds. Evidence uncovered by law enforcement indicates that a single money services business was involved in laundering upwards of $220 million per year through a sophisticated scheme that relied on underground banking infrastructure and that took advantage of a lax regulatory environment in the gaming sector.”
The report points that the federal anti–money laundering regime is not effective. To understand money laundering in British Columbia, it is necessary to understand the federal regime and the work done by agencies such as the Royal Canadian Mounted Police (RCMP) and Canada’s financial intelligence unit, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
One of the primary criticisms of the federal regime is the effectiveness of FINTRAC. The report states that FINTRAC receives an enormous volume of reports from public- and private-sector reporting entities, but it produces only a modest number of intelligence packages that go to law enforcement. For example, in 2019–20, FINTRAC received over 31 million individual reports. In that same year, FINTRAC disclosed only 2,057 intelligence reports to law enforcement across Canada, and only 355 to law enforcement agencies in British Columbia.
The RCMP’s lack of attention to money laundering has allowed for the unchecked growth of money laundering since at least 2012, according to the Report. Cullen blamed cuts made to the Integrated Proceeds of Crime unit of RCMP for this.
The report states, “Prior to 2012, the RCMP maintained some capacity and expertise to pursue money laundering and proceeds of crime investigations. A shift in focus in 2012 largely eliminated that capacity and expertise, leaving, for the next decade, a glaring enforcement gap. This gap left money laundering to proliferate in this province, largely unchecked. From 1990 to 2012, the RCMP maintained Integrated Proceeds of Crime (IPOC) units in each province. These units were responsible for the most serious money laundering and proceeds of crime investigations. They developed a high level of expertise and were critical to the federal government’s strategy to combat organized crime.
In 2012, the federal government made significant cuts to government services and disbanded the IPOC units. This left no enforcement body with primary responsibility to investigate money laundering or proceeds of crime in this province. The disbandment of the IPOC units was a pivotal moment, which allowed for the unchecked growth ofmoney laundering in the gaming industry and other sectors of the economy for the better part of a decade.
There was no sustained effort to investigate money laundering activity in British Columbia. Between 2015 and 2020, there were only two other major money laundering investigations that progressed to the charge-approval stage. This level of attention by the RCMP to money laundering is not commensurate with the money laundering activity and risks in this province, the report states.
This report makes a number of recommendations for reform, some of which transcend specific sectors. Two key recommendations are the creation of an AML Commissioner and the dedicated provincial money laundering intelligence and investigation unit. “My aim is to offer advice that is realistic, practical, and effective, and I hope and trust that the Province will remain committed to tackling this pernicious problem,” said Cullen.
“The commission has confirmed there was a serious and decade-long problem of organized crime laundering hundreds of millions of dollars in B.C. casinos, and that it was the work of our governmentin2017thatuncoveredthisforthepublicandendedthiscriminality.Iamproudof our response, and grateful for the support of colleagues, including then-minister of finance CaroleJamesandPremierJohnHorganwhosupportedwhatneededtobedoneinourcasinos, even though those actions jeopardized provincial revenue,” saidDavidEby,AttorneyGeneral.
Ebby also said, “I believe these recommendations will help us to transform the meaning of the’Vancouver model’fromadescriptionofuncheckeddirtymoneymovingthroughourcasinostoamodelof governments responding forcefully to the threat of money laundering. I look forward to working on these reforms with my colleagues both inside and outside government, and all British Columbians.”
